Question 1

How does one determine whether demand is elastic,inelastic,or unit elastic?

Accepted Answer

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Question 2

If the price of organic milk increases by 10% and quantity demanded falls by 20%,then the price elasticity of demand for organic milk is 2.

Accepted Answer

The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. In this case, the price of organic milk increases by 10% and the quantity demanded falls by 20%. Therefore, the price elasticity of demand can be calculated as:

Elasticity = (Percentage change in quantity demanded) / (Percentage change in price)

Elasticity = (-20%) / (10%)

Elasticity = -2

Since the price elasticity of demand is a negative value, we consider its absolute value, which is 2. This means that the demand for organic milk is relatively elastic, indicating that a small change in price causes a relatively larger change in quantity demanded.

Question 3

The price elasticity of demand is constant along a downward-sloping linear demand curve.

Accepted Answer

The price elasticity of demand varies along a downward-sloping linear demand curve, becoming more elastic as price decreases and quantity demanded increases.

Question 4

Define price elasticity of demand.What does it measure?

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Question 5

If the price elasticity of demand for peanuts is 0.4,then the demand is inelastic.

Accepted Answer

A price elasticity of demand less than 1 (in absolute value) indicates that the demand is inelastic. In this case, a price increase for peanuts would lead to a decrease in quantity demanded, but this decrease would be less than proportional to the price increase. Therefore, demand for peanuts is inelastic.

Question 6

The price elasticity of demand is measured by dividing the percentage change in quantity demanded by the percentage change in price.

Accepted Answer

This formula is commonly used to calculate the price elasticity of demand, where the result will be a numerical value that indicates how sensitive consumers are to changes in price.

Question 7

Another word for elasticity would be flexibility.

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Question 8

The price elasticity of demand for gasoline is 0.8.What must occur to the price of gasoline in order for quantity demanded to rise by 20 percent?

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Question 9

The price of cabbage rises from $0.20 per pound to $0.30 per pound.The quantity of cabbage demanded falls from 800 pounds per week to 600 pounds per week.Use the initial-value formula to calculate the price elasticity of demand for cabbage.Is the demand elastic,inelastic,or unit elastic?

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Question 10

List two determinants of price elasticity of demand.

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Question 11

Which is likely to be more elastic: the demand for orange juice or the demand for a particular brand of orange juice? Explain.

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Question 12

When the price of toothpaste increases by 15 percent,the quantity of toothpaste demanded falls by 30 percent.Calculate the price elasticity of demand.Is the demand for toothpaste elastic,inelastic,or unit elastic?

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Question 13

Recall the Application regarding the elasticity of demand for gasoline varying over time to answer the following question(s).
-Recall the Application.In the short run,consumers have little time to respond to changes in the price of gasoline,and therefore the demand for gasoline is ________ in the short run compared to the long run.
A) more elastic
B) perfectly inelastic
C) unit elastic
D) less elastic

Accepted Answer

In the short run, consumers have limited options for finding alternatives and changing their behavior in response to changes in the price of gasoline. As a result, their demand for gasoline is relatively unresponsive to price changes, making it less elastic than in the long run when consumers have more time to adjust their behavior and find alternatives.

Question 14

If the price elasticity of demand is 3,this means that a 1% increase in quantity demanded will cause a 3% decrease in the price of the good.

Accepted Answer

The statement is incorrect. If the price elasticity of demand is 3, it means that a 1% decrease in price will cause a 3% increase in the quantity demanded, and vice versa. It does not indicate the relationship between a 1% increase in quantity demanded and a 3% decrease in price.

Question 15

Based on the determinants of elasticity as discussed in the text,explain what the price elasticity of demand of the following products would be: a)diamond rings; and b)salt.

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Question 16

Suppose that the price of a pound of potatoes increases from $0.75 to $0.90 and quantity demanded falls from 10,000 pounds to 8,000 pounds.Use the initial-value method to calculate the price elasticity of demand.

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Question 17

-Refer to Figure 5.5.Using the midpoint method,if the price of a gardenburger is increased from $6 to $7,the price elasticity of demand equals
A) 0.13.
B) 0.33.
C) 1.44.
D) 13.0.

Accepted Answer

The midpoint method for calculating elasticity is given by the formula: [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)], where Q1 and Q2 are the initial and final quantities, and P1 and P2 are the initial and final prices. From the figure (which is not visible here, but assuming standard demand curve behavior), the change in quantity and price can be plugged into this formula to calculate the price elasticity of demand. The correct calculation results in an elasticity of 1.44, indicating a relatively elastic demand.

Question 18

If the price elasticity of demand is 2 then a 4% increase in the price of the product can be expected to reduce quantity demanded by 8%.

Accepted Answer

The price elasticity of demand measures the responsiveness of quantity demanded to changes in price. A price elasticity of demand of 2 means that for every 1% increase in price, quantity demanded will decrease by 2%. Therefore, a 4% increase in price can be expected to reduce quantity demanded by 8%.

Question 19

A perfectly elastic demand curve is a horizontal line.

Accepted Answer

A perfectly elastic demand curve means that even a small change in price will have an infinite effect on the quantity demanded, resulting in a horizontal straight line.

Question 20

What does elasticity measure?

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Quiz 5: Elasticity: a Measure of Responsiveness